Euro zone yields near one-month high after oil jumps on US-Iran strikes

Euro zone bond yields rose to their highest in almost a month on Wednesday as oil prices climbed sharply after the U.S. and Iran traded strikes, threatening the framework deal to end their war.

Germany's 10-year bond yield DE10YT=RR rose 5 basis points to 3.034%, its highest since July 11. Yields move inversely to prices.

Iran's Revolutionary Guards said they targeted U.S. military sites in Bahrain and Kuwait on Wednesday after the U.S. launched a wave of strikes on Iran in response to attacks on tankers in the Strait of Hormuz. The U.S. also revoked a licence allowing Iran to sell oil.

Energy prices jumped, with international benchmark Brent crude LCOc1 up 3% to $76.50 a barrel and trading at around its highest in two weeks.

Oil prices have fallen sharply — from as high as $126 a barrel in late April — since the U.S. and Iran reached a deal to end their war in mid-June, which started further talks on a range of issues, such as sanctions, and allowed energy to start flowing through the key Strait of Hormuz.

Traders added to their bets on further European Central Bank rate hikes on Wednesday, with money markets last pointing to 31 bps of monetary tightening by the end of the year, up from 25 bps on Tuesday.

Germany's 2-year bond yield DE2YT=RR, which is sensitive to ECB rate expectations, rose 5 bps on Wednesday to 2.637%, its highest since June 22.

"Trump revoked the export waiver for Iranian oil, which sent oil prices soaring and U.S. Treasuries tumbling in yesterday's late session," said Hauke Siemssen, rates strategist at Commerzbank.

"The front-end (shorter-dated bonds) should be most under pressure today, with oil above $76 a barrel and forwards likely to bring forward chances for another ECB rate hike this year."

-Reporting by Harry Robertson; Editing by Alex Richardson/Reuters